Reducing transportation-related greenhouse gas emissions using a market-based approach is the goal of low-carbon fuel standards (LCFS). These programs use financial incentives—like credits, trading systems, or pricing mechanisms—to encourage businesses and consumers to reduce emissions, rather than relying solely on direct regulations or mandates.
But what could this type of program mean for prices at the gas pump in Minnesota? The BBER study, prompted by the University of Minnesota’s Center for Transportation Studies (CTS), examined the potential price impacts of LCFS programs, using examples from similar programs in other states.
The project involved a research collaboration with Dr. Neil A. Wilmot, associate professor of economics at UMD’s Labovitz School of Business and Economics, and featured substantial contributions from graduating senior and BBER undergraduate research assistant Ethan Ion. Ion examined LCFS policies in California, Washington, and Oregon, reviewed existing literature, and collected gasoline price data to assist with the analysis. “It was exciting to work on research that’s both relevant to Minnesota and connected to real policy discussions,” Ion said.
The findings suggest that early LCFS programs have had limited direct effects on fuel prices. However, more aggressive carbon intensity targets could possibly lead to higher gasoline costs over time. “Understanding the full economic impact of these standards is essential if we want to design policies that balance environmental goals with affordability,” Dr. Wilmot noted. Wilmot hopes to continue to investigate this line of research, which aligns with his expertise in energy economics and oil pricing.
You can read more about the study in a recently published Center for Transportation Studies article and view the BBER’s full report on the U of M’s Digital Conservancy.